Rants and Raves on Espresso

Need any more evidence that Fair Trade coffee isn’t unquestionably the “right thing to do” when it comes to poverty and the world’s coffee growers? Today’s The Australian reported on two Melbourne academics who have lodged formal complaints against Oxfam Australia, which oversees Australian Fair Trade certification, challenging that Fair Trade doesn’t achieve what it claims: Oxfam coffee ‘harms’ poor farmers | News | The Australian. To quote the researchers:

“Our primary complaint is that this is an unsustainable system. The only sustainable mechanism is through free trade. They are artificially cooking up the international coffee trade, to promote the interests of the Fairtrade brand and the people who sign up to it.”

Ouch. Put that in your biodeisel car and fry it.

And to think that in 2002 Berkeley academics tried to get Measure O passed, which would have criminalized any restaurant or café that served coffee that wasn’t Fair Trade certified — with violators facing fines up to $100 and six months in jail.

3 Responses to “Oxfam coffee ‘harms’ poor farmers”

If only there were an unquestionable truth! But alas, here is a philosopher’s woeful attempt to provide an argument for fair trade. If it goes through, then it seems like measure O might have been on the right track – what we need to do to ensure that fair trade works (at least in theory) is to commit to purchasing fair trade goods into perpetuity. Perhaps the economists can explain this argument’s flaws to me?

Theoretically, it seems quite possible that fair trade will offer Pareto superior improvements for the poor. To see why, consider the following argument for the conclusion that buying fair trade bananas (for instance) is always better for the poor than buying non-fair trade bananas if a consumer does not change the amount of bananas she purchases and will continue to buy fair trade bananas into perpetuity.

Suppose a consumer will either purchase bananas from a fair trade source for (say) $2 a bag or non-fair trade source for $1. If the consumer buys from a fair trade source the poor people who receive her money would, without her money, either have gone out of business or not. If the poor people she supports would otherwise have gone out of business they would have either gone into a more profitable business (than the regular banana business) or not. If not, then the consumer has benefited them. If the poor people she supports would have otherwise gone into a more profitable business (say sugar) then they do better to make fair trade bananas then to go into the sugar business, otherwise they would have gone into sugar. The poor people this consumer supports are, thus, better off with fair trade. The consumer knows that she has helped the poor people who make her fair trade bananas.

The only problem arises if, after the consumer starts buying fair trade she buys fewer bananas total or if she stops buying fair trade after a while. Suppose she buys fewer bananas. Then the total amount of bananas being purchased goes down and the consumer supports fewer people. Before switching to fair trade, she might have spent two dollars a week on bananas and supported two farmers who each make one bag a week. If she only buys one bag of fair trade bananas instead (because, say, she only wants to spend $2 on bananas) then the fair trade farmer does better, but the other farmer may lose all income. This will not happen in all circumstances, though. Suppose, for instance, that with the decline of the normal banana business there is only room for one of our two farmers to profit by moving into sugar. If the consumer starts buying fair trade, the poor person who chooses to make fair trade bananas because it is the best option, but who would otherwise have gone into sugar, no longer goes into sugar. Thus, there is now room for the other farmer to profit by moving into sugar. Both farmers will benefit from fair trade.

Suppose that, instead, the consumer buys the same amount of bananas but only buys fair trade for a while before reverting to normal bananas. When she buys fair trade she creates an incentive for people to become fair trade farmers. Demand for normal bananas falls. What will happen then depends on whether the fair trader farmers losing business revert to normal practices, go over to sugar, or are unable to transition and end up out of business altogether. Perhaps in the interim a better opportunity than sugar has arisen (say, coffee). Everyone, including those who grew the consumer’s fair trade bananas for a while, may be better off.

In any case, assuming that we do not change the amount of bananas we purchase and will continue to buy fair trade into perpetuity, it seems that fair trade will not harm the poor and will benefit some (fair trade farmers will do better and some of the normal farmers may even be able to transition into sugar).

Although I probably should be working rather than blogging, a few thoughts on your thoughts:

* Fair Trade profits co-operatives, not growers directly

I think this depends on the fair trade certification organization but the idea behind having cooperatives is often to help producers increase their bargaining power to get better prices.

* Some growers are economically strong-armed to conform to Fair Trade’s certification rigors and requirements to join co-operatives

Do you only mean by this they can’t participate as a fair trade certified farmer unless they join cooperatives? If so, how is that “strong-arming”? Especially if 1) this is the best way to benefit the farmers because it allows them to get better deals on credit and prices, and 2) the farmers could join other fair trade organizations that don’t require cooperatives. Do you have an argument that people offering to certify something as fair trade coffee have to allow individual farmers to participate? It may be very difficult to do so (lots of book keeping etc.)

I don’t believe this is entirely true, again it probably depends on the particular organization. And, even if fair trade is of variable quality the cost to our taste buds may be worth it if it helps the poor.

* The track record is poor for systems that depend on consumers universally paying more for qualitatively and quantitatively the same things

That is true, but do you have a better idea that is feasible? Perhaps fair trade will provide part of the solution.